ell e#uipped around 4000 SQUARE (eet tissue culture laboratory is situated at Uttara) a con enient location) ha in! care(ul desi!nin! and plannin!) (acilitated to produce 10)00000 seedlin!s per year% &he other acti ities o( this pro'ect +ill be o( research and de elop"ent in the (ield o( $iotechnolo!y to protect so"e o( endan!ered "edicinal plant and to brin! so"e ne+ as cane) rattan) ba"boo +hich is al"ost e-tinct in the country% &he hospital is nearin! co"pletion at a cost o( o er US.Introduction:
SQUARE has setup a plant tissue culture laboratory to de elop a!ricultural/a!ro processin! sector in the country and is co""itted to brin! i"pro ed #uality plantin! "aterials and year round production throu!h A!ri $iotech% &he "a'or acti ities o( A!ri $iotech is to pro ide disease (ree) stress (ree) hi!h yieldin! seed * seedlin!s such as potato) banana) !in!er) tur"eric and so"e (lo+ers includin! arieties o( orchids to the (ar"er * nursery"en to sol e #uality seed proble"s in this a!ro based country% .<5 co"pliant "anu(acturin! plant and #uality assurance that are in line +ith the practices o( de eloped +orld% = Sourcin! ra+ "aterials (ro" the reno+ned suppliers only%
= Ensurin! the products ha in! #uality assurance co""ensurate to SQUARE8s #uality policy% = In ol in! hi!hly #uali(ied) s:illed and +ell trained personnel in "anu(acturin!) "ar:etin!) sales and distribution%
4
.roup that has been e ol ed to ensure the a ailability o( "odern 1erbal <edicines to the people o( this country% &o ensure "odern 1erbal <edicines) the co"pany is 3 = 7ealin! +ith the products o( natural sources that ha e scienti(ic data to pro e their clinical indications and e((icacy% = 6peratin! a . 40 "illion and is scheduled to !o into operation in "id 200/% 0ocused to pro ide International standard healthcare ser ices at an a((ordable price SQUARE 1ospitals 2td% is a "ulti3disciplinary hospital +ith specialty in 4ancer) 4ardiac and 5ediatrics% 6ne stop state o( the art 7ia!nostic Ser ices +ill be it8s another "a'or ser ice% &he hospital +ill be e-clusi ely "ana!ed by $u"run!rad 1ospital International o( &hailand) only US accredited hospital in Asia% &he 3003bed hospital is located in the city center% 1200 patients can be ser ed per day by its out patient depart"ent throu!h it8s /0 e-a" roo"% 1oused in an 19 storied buildin! co erin! 40)000 s#% "eters the (acility can also acco""odate 200 cars in its 3 base"ent par:in! areas 7edicated to brin! the nature8s best (or hu"an health An endea or o( SQUARE .

?parado.e can easily (ind that price is related +ith e ery aspect o( our li(e% I( +e ta:e one day a person8s li(e (or our e-peri"ent +e can easily decide +hat is price and ho+ it is a part o( our e ery day li(e% 0or e-a"ple +e ha e chosen <r% A% 1e li es in <oha""adpur +ith his (a"ily% 1e has to pay a certain a"ount o( "oney to the o+ner o( the (lat as he is li in! in it% &his price is called rent% 1e usually +a:es up B a" in the "ornin!% 1e then prepare (or his o((ice% 1e ta:es the bus (or +hich he has to bou!ht a tic:et and pay (or the tic:et% &his e-pense is called fare% .o( alue@% &he use3 alue +as supposed to !i e so"e "easure o( use(ulness) later re(ined as "ar!inal bene(it ?+hich is "ar!inal utility counted in co""on units o( alue@ +hile e-chan!e alue +as the "easure o( ho+ "uch one !ood +as in ter"s o( another) na"ely +hat is no+ called relati e price% /!i e in 6eal Life 5rice) thou!h sounds si"ple) is ery di((icult to e-plain% &his si"ple ter" "ay "ean di((erent thin!s to di((erent people% &raditionally) by price +e "ean the a"ount o( "oney +e pay or char!e (or a product or ser ice% 5rice "ust there(ore be concei ed o( as a "ultidi"ensional process in ol in! chan!e o( asset) pro in! ser ice) obtainin! ser ice) "aintenance o( assets) day to day e-penses and "any "ore% .ater 5arado.hen he arri es at his o((ice his boss con!ratulates hi" and says that he has !ot pro"otion C
./!i e in 01eo!y In ordinary usa!e) price is the #uantity o( pay"ent or co"pensation (or so"ethin!% 5eople "ay say about a cri"inal that he has >paid the price to society8 to i"ply that he has paid a penalty or co"pensation% &hey "ay say that so"ebody paid (or his (olly to i"ply that he su((ered the conse#uence% Econo"ists ie+ price as an e-chan!e ratio bet+een !oods that pay (or each other% In case o( barter bet+een t+o !oods +hose #uantities are .and y) the price o( .is the ratio y/-) +hile the price o( y is the ratio -/y% &his ho+e er has not been used consistently) so that old con(usion re!ardin! alue (re#uently reappears% &he alue o( so"ethin! is a #uantity counted in co""on units o( alue called nu"eraire) +hich "ay e en be an i"a!inary !ood% &his is done to co"pare di((erent !oods% &he unit o( alue is (re#uently con(used +ith price) because "ar:et alue is calculated as the #uantity o( so"e !ood "ultiplied by its no"inal price% &heory o( price asserts that the "ar:et price re(lects interaction bet+een t+o opposin! considerations% 6n the one side are de"and considerations based on "ar!inal utility) +hile on the other side are supply considerations based on "ar!inal cost% An e#uilibriu" price is supposed to be at once e#ual to "ar!inal utility ?counted in units o( inco"e@ (ro" the buyer8s side and "ar!inal cost (ro" the seller8s side% &hou!h this ie+ is accepted by al"ost e ery econo"ist) and it constitutes the core o( "ainstrea" econo"ics) it has recently been challen!ed seriously% &here +as ti"e +hen people debated use3 alue ersus e-chan!e alue) o(ten +onderin! about the 7ia"ond3.

and his salary +ill be increased% &his is another :ind o( price because he has achie ed it +ith hard +or:% 0e+ hours later a person co"es to his des: and o((ers "oney i( he helps the person ille!ally% 1e re(used to do so% &his o((er is also a price called bride% A(ter a +hile he !oes to the ban: (or o((icial +or: the ban: o((icer said he has !ot ta:a 1300 interest in his account% &his a"ount o( "oney is also a price called interest% 2ater he +ent to pic: up his son (ro" the school and paid e-a" fees and the tuition% &hese types o( pay"ents are also a di"ension o( price% So +e can see that price is related in our e eryday li(e% 31at a "!i e s1ould do A +ell chosen price should do three thin!s :
• • •
achie e the (inancial !oals o( the (ir" ?e!%: pro(itability@ (it the realities o( the "ar:etplace ?+ill custo"ers buy at that priceD@ support a product8s positionin! and be consistent +ith the other ariables in the "ar:etin! "io price is in(luenced by the type o( distribution channel used) the type o( pro"otions used) and the #uality o( the product  price +ill usually need to be relati ely hi!h i( "anu(acturin! is e-pensi e) distribution is e-clusi e) and the product is supported by e-tensi e ad ertisin! and pro"otional ca"pai!ns  a lo+ price can be a iable substitute (or product #uality) e((ecti e pro"otions) or an ener!etic sellin! e((ort by distributors
0ro" the "ar:eters point o( ie+) an effi ient "!i e is a price that is ery close to the "a-i"u" that custo"ers are prepared to pay% In econo"ic ter"s) it is a price that shi(ts "ost o( the consu"er surplus to the producer% A !ood pricin! strate!y +ould be the one +hich could balance bet+een the 5rice (loor?the price belo+ +hich the or!aniEation ends up in losses@ and the 5rice ceilin!?the price beyond +hich the or!aniEation e-periences a no de"and situation@%
Definitions of /!i ing
&he effe ti&e "!i e is the price the co"pany recei es a(ter accountin! (or discounts) pro"otions) and other incenti es% /!i e lining is the use o( a li"ited nu"ber o( prices (or all your product o((erin!s% &his is a tradition started in the old (i e and di"e stores in +hich e erythin! cost either C or 10 cents% Its underlyin! rationale is that these a"ounts are seen as suitable price points (or a +hole ran!e o( products by prospecti e custo"ers% It has the ad anta!e o( ease o( ad"inisterin!) but the disad anta!e o( in(le-ibility) particularly in ti"es o( in(lation or unstable prices% A loss leader is a product that has a price set belo+ the operatin! "ar!in% &his results in a loss to the enterprise on that particular ite") but this is done in the hope that it +ill dra+ custo"ers into the store and that so"e o( those custo"ers +ill buy other) hi!her "ar!in%
/
.

ariables "ay a((ect pricin! decisions% 0or e-a"ple) producers usin! "any resellers +ho are e-pected to support and pro"ote their products "ay ha e to build lar!er reseller "ar!ins into their prices% &he decision to position the product on hi!h3 per(or"ance #uality +ill "ean that the seller "ust char!e a hi!her price to co er hi!her costs% 4o"panies o(ten position their products on price and then tailor other "ar:etin! "idecisions to the prices they +ant to char!e% 1ere) price is a crucial product3positionin! (actor that de(ines the product8s "ar:et) co"petition) and desi!n% <any (ir"s support such price3 positionin! strate!ies +ith a techni#ue called tar!et costin!) a potent strate!ic +eapon% 0a!get osting: .ele"ents @ in di((erent #uantities to deli er a particular (inal colours% E ery hand painted picture is ori!inal in so"e +ay) as is e ery "ar:etin! "i-% 5rice is only one o( the "ar:etin! "i.tools that a co"pany uses to achie e its "ar:etin! ob'ecti es% 5rice decisions "ust be coordinated +ith product desi!n) distribution) and pro"otion decisions to (or" a consistent and e((ecti e "ar:etin! pro!ra"% 7ecisions "ade (or other "ar:etin! "i.e ha e seen that costs chan!e +ith production scale and e-perience% &hey can also chan!e as a result o( a concentrated e((ort by the co"pany8s desi!ners) en!ineers) and purchasin! a!ents to reduce the"% &he "ethod called tar!et costin!% &hey use "ar:et research to establish a ne+ product8s desired (unctions% &hen they deter"ine the price at +hich the 10
.e ti&es: Fon pro(it and public or!aniEations "ay adopt a nu"ber o( other pricin! ob'ecti es% A uni ersity ai"s (or partial cost reco ery) :no+in! that it "ust rely on pri ate !i(ts and public !rants to co er the re"ainin! costs% A nonpro(it hospital "ay ai" (or (ull cost reco ery in its pricin!% A nonpro(it theater co"pany "ay price its productions to (ill the "a-i"u" nu"ber o( theater seats% A social ser ice a!ency "ay sat a social price !eared to the aryin! inco"e situations o( di((erent clients% Ma!#eting Mi7 St!ategy: &he "ar:etin! "i.•
/!odu t=+uality leade!s1i":
A co"pany "i!ht ai" to be the product3#uality leader in the "ar:et% .is probably the "ost (a"ous "ar:etin! ter"% Its ele"ents are the basic) tactical co"ponents o( a "ar:etin! plan% Also none as the (our 58s) the "ar:etin! "iele"ents are price) place) product) and pro"otion% &he concept is si"ple% &hin: about another co""on "i-3 a ca:e "i-% All ca:es contain e!!s) "il:) (lour) and su!ar% 1o+e er) you can alter the (inal ca:e by alterin! the a"ounts o( "iele"ents contained in it% So (or a s+eet ca:e add "ore su!ar% It is the sa"e +ith the "ar:etin! "i-% 0or a hi!h pro(ile brand) increase the (ocus on pro"otion and desensitiEe the +ei!ht !i en to price% Another +ay to thin: about the "ar:etin! "i.is to use the i"a!e o( an artist8s palette% &he "ar:eter "i-es the pri"e colours ? "i.hen the co"pany is able to create a positi e i"a!e to the "ind o( people they can (ollo+ the product3#uality leadership strate!y% $ecause o( brand na"e people +ill purchase their product% Ot1e! /!i ing Ob.

product "ust dell !i en its appeal and co"petitions8 prices% &hey deduct the desired pro(it "ar!in (ro" this price and this lea es the tar!et cost they "ust achie e% &hey then e-a"ine each cost ele"ent3 desi!n) en!ineerin!) "anu(acturin!) sales) and so on3 and brea: it do+n into (urther co"ponents% &hey consider +ays to reen!ineer co"ponents) eli"inate (unctions) and brin! do+n supplier costs% &he +hole ob'ecti e is to brin! the (inal costs pro'ections into the tar!et cost ran!e% I( they can8t succeed) they "ay decide a!ainst de elopin! the product because it could not sell (or the tar!et price and "a:e the tar!et pro(it% .tools to create non price positions% 6(ten) the best strate!y is not to char!e the lo+est price) but rather to di((erential the "ar:etin! o((er to "a:e it +orth a hi!her price% &hus) "ar:eters "ust consider the total "ar:etin! "i.ele"ents% $ut e en +hen (eaturin! price) "ar:eters need to re"e"ber that custo"ers rarely buy on price alone% Instead) they see: products that !i e the" the best alue in ter"s o( bene(its recei ed (or the price paid% $osts 4osts set the (loor (or the price that the co"pany can char!e% &he co"pany +ants to char!e a price that both co ers all its costs (or producin!) distributin!) and sellin! the product and deli ers a (air rate o( return (or its e((ort and ris:% A co"pany8s costs "ay be an i"portant ele"ent in its pricin! strate!y% 4o"panies +ith lo+er costs can set lo+er prices that result in !reater sales and pro(its% 0y"es of osts: A co"pany8s costs ta:e t+o (or"s) (i-ed costs and ariable costs%
•
)i7ed osts:
0i-ed costs ?also :no+n as o erhead@ are costs that do not ary +ith production or sales le el% 0or e-a"ple) a co"pany "ust pay each "onth8s bills (or rent) heat) interest) and e-ecuti e salaries) +hate er the co"pany8s output% 0or e-a"ple) a retailer "ust pay rent and utility bills irrespecti e o( sales% Unit (i-ed costs) called a era!e (i-ed costs ?A04@) decline +ith olu"e) (ollo+in! a rectan!ular hyperbola as the in erse o( the olu"e o( production%
•
8a!iable osts:
Kariable costs ary directly +ith the le el o( production% &hese costs tend to be the sa"e (or each unit produced% &hey are called ariable because their total aries +ith the nu"ber o( units produced% In the e-a"ple o( the retailer) ariable costs "ay pri"arily be co"posed o( in entory ?!oods purchased (or sale@) and the cost o( !oods is there(ore al"ost entirely ariable% In "anu(acturin!) direct "aterial costs are an e-a"ple o( a ariable cost% An e-a"ple o( ariable costs is the prices o( the supplies needed to produce a product%
11
.+hen settin! prices% I( the product is positioned on non price (actors) then decisions about #uality) pro"otion) and distribution +ill stron!ly a((ect price% I( price is a crucial positionin! (actor) then price +ill stron!ly a((ect decisions "ade about the other "ar:etin! "i.hen they can succeed) pro(its are li:ely to (ollo+% 6ther co"panies dee"phasiEe price and use other "ar:etin! "i.

ithout understandin! it) a "ar:eter can: 14
."ar:etin! and other e((orts% Identi(yin! the true costs arisin! in a custo"er relationship also enables a co"pany to better e-plain its char!es to the custo"er% O!gani*ational $onside!ations: <ana!e"ent "ust decide +ho +ithin the or!aniEation should set prices% 4o"panies handle pricin! in a ariety o( +ays% In s"all co"panies) prices are o(ten set by top "ana!e"ent rather than by the "ar:etin! or sales depart"ents% In lar!e co"panies) pricin! is typically handled by di isional or product line "ana!ers% In industrial "ar:ets) salespeople "ay be allo+ed to ne!otiate +ith custo"ers +ithin certain price ran!es% E en so) top "ana!e"ent sets the pricin! ob'ecti es and policies) and it o(ten appro es the prices proposed by lo+er3 le el "ana!e"ent or salespeople% In industries in +hich pricin! is a :ey (actor) co"panies o(ten ha e a pricin! depart"ent to set the best prices or help others in settin! the"% &his depart"ent reports to the "ar:etin! depart"ent or top "ana!e"ent% 6thers +ho ha e an in(luence on pricin! include sales "ana!ers) production "ana!ers) (inance "ana!ers) and accountants% -7te!nal fa to!s affli ting "!i ing de isions 01e Ma!#et and Demand Ma!#et: In econo"ics) a "ar:et is a social structure (or e-chan!e o( ri!hts) +hich enables people) (ir"s and products to be e aluated and priced% &here are t+o roles in "ar:ets) buyers and sellers% &he de(inition i"plies that at least three actors are needed (or a "ar:et to e-istG at least one actor) on the one side o( the "ar:et) +ho is a+are o( at least t+o actors on the other side +hose o((ers) can be e aluated in relation to each other% A "ar:et allo+s buyers and sellers to disco er in(or"ation and carry out a oluntary e-chan!e o( !oods or ser ices% It is one o( the t+o :ey institutions (or or!aniEin! trade) alon! +ith the ri!ht to o+n property% In e eryday usa!e) the +ord H"ar:etI "ay also re(er to the location +here !oods are traded) or in other +ords) the "ar:etplace% Demand: &he a"ount o( a particular econo"ic !ood or ser ice that a consu"er or !roup o( consu"ers +ill +ant to purchase at a !i en price is called de"and% &he de"and cur e is usually do+n+ard slopin!) since consu"ers +ill +ant to buy "ore as price decreases% 7e"and (or a !ood or ser ice is deter"ined by "any di((erent (actors other than price) such as the price o( substitute !oods and co"ple"entary !oods% In e-tre"e cases) de"and "ay be co"pletely unrelated to price) or nearly in(inite at a !i en price% Alon! +ith supply) de"and is one o( the t+o :ey deter"inants o( the "ar:et price% I( supply is held constant) an increase in de"and leads to an increased "ar:et price) +hile a decrease in de"and leads to a decreased "ar:et price% Ma!#et3demand !elations1i": &o set a speci(ic price (or a speci(ic product) the "ar:eter "ust understand the relationship bet+een the "ar:et situation and the de"and o( the product in the "ar:et% .

/u!e o! /e!fe t om"etition: 5er(ect co"petition is an econo"ic "odel that describes a hypothetical "ar:et (or" in +hich no producer or consu"er has the "ar:et po+er to in(luence prices% Accordin! to the standard econo"ical de(inition o( e((iciency ?5areto e((iciency@) per(ect co"petition +ould lead to a co"pletely e((icient outco"e% &he analysis o( per(ectly co"petiti e "ar:ets pro ides the (oundation o( the theory o( supply and de"and Assum"tions of "e!fe t om"etition: 6(ten "odels o( per(ect co"petition assu"e that so"e subset o( the (ollo+in! si.1% 6 er3price the product or 2% Under alue the product $oth these e((ects "ay be de astatin! the co"pany) especially +hen launchin! a ne+ product% In the (ollo+in! pa!es) +e tried to (ocus on ho+ the arious "ar:et situations and buyer perception o( the product "ay in(luence the pricin! decision% /!i ing in diffe!ent ty"es of ma!#et In the real +orld econo"y) arious (or"s o( "ar:et can be obser ed +hich drastically a((ect the pricin! and "ar:etin! o( the products o( the co"panies related to each (or"% Each type o( "ar:et situation re#uires "ar:eters to set reasonable prices +hich allo+ the" to obtain hi!hest pro(it% 0or" the ie+point o( econo"icsG +e can cate!oriEe the "ar:ets in (ollo+in! types:
1.conditions be (ul(illed% In such a "ar:et) prices +ould nor"ally "o e instantaneously to econo"ic e#uilibriu"% It should be noted ho+e er that these represent su((icient) not necessary conditions% Ato"icity An ato"ic "ar:et is one in +hich there are a lar!e nu"ber o( s"all producers and consu"ers on a !i en "ar:et) each so s"all that its actions ha e no si!ni(icant i"pact on others% 0ir"s are price ta:ers) "eanin! that the "ar:et sets the price that they "ust choose%
1C
.

oods and ser ices are per(ect substitutesG that is) there is no product di((erentiation% ?All (ir"s sell an identical product@ 5er(ect and co"plete in(or"ation All (ir"s and consu"ers :no+ the prices set by all (ir"s ?see per(ect in(or"ation and co"plete in(or"ation@% E#ual access All (ir"s ha e access to production technolo!ies) and resources are per(ectly "obile% 0ree entry Any (ir" "ay enter or e-it the "ar:et as it +ishes ?see barriers to entry@% Indi idual buyers and sellers act independently &he "ar:et is such that there is no scope (or !roups o( buyers and/or sellers to co"e to!ether +ith a ie+ to chan!in! the "ar:et price ?collusion and cartels are not possible under this "ar:et structure@ $eha ioral assu"ptions o( per(ect co"petition are that:
• •
4onsu"ers ai" to "a-i"iEe utility 5roducers ai" to "a-i"iEe pro(it
6esults of "e!fe t om"etition:
In the short3run) it is possible (or an indi idual (ir" to "a:e abnor"al pro(it% &his situation is sho+n in this dia!ra") as the price or a era!e re enue) denoted by 5 is abo e the a era!e cost denoted by 4 1/
.1o"o!eneity .

S1o!t=!un e+uilib!ium of t1e fi!m unde! Mono"olisti $om"etition A "onopolistically co"petiti e (ir" acts li:e a "onopolist in that the (ir" is able to in(luence the "ar:et price o( its product by alterin! the rate o( production o( the product% Unli:e in per(ect co"petition) "onopolistically co"petiti e (ir"s produce products that are not per(ect substitutes% As such) brand A8s product) +hich is di((erent ?or at least percei ed to be di((erent@ (ro" all other brands8 products) is a ailable (ro" only a sin!le producer% In the short3run) the "onopolistically co"petiti e (ir" can e-ploit the hetero!eneity o( its brand so as to reap positi e econo"ic pro(it ?i%e% the rate o( return is !reater than the rate re#uired to co"pensate debt and e#uity holders (or the ris: o( in estin! in the (ir"@% 6ne possible e((ect o( ad ertisin! on a (ir"8s lon! run a era!e cost cur e +hen earnin! an econo"ic pro(it in the short run is to raise the cur e%
Long=!un e+uilib!ium of t1e fi!m unde! Mono"olisti $om"etition In the lon!3run) ho+e er) +hate er distin!uishin! characteristic that enables one (ir" to reap "onopoly pro(its +ill be duplicated by co"petin! (ir"s% &his co"petition +ill dri e the price o( the product do+n and) in the lon!3run) the "onopolistically co"petiti e (ir" +ill "a:e Eero econo"ic pro(it ?i%e% a rate o( return e#ual to the rate re#uired to co"pensate debt and e#uity holders (or the ris: o( in estin! in the (ir"@%
19
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here there is a (or"al a!ree"ent (or such collusion) this is :no+n as a cartel% 0ir"s o(ten collude in an atte"pt to stabiliEe unstable "ar:ets) so as to reduce the ris:s inherent in these "ar:ets (or in est"ent and product de elop"ent% &here are le!al restrictions on such collusion in "ost countries% &here does not ha e to be a (or"al a!ree"ent (or collusion to ta:e place ?althou!h (or the act to be ille!al there "ust be a real co""unication bet+een co"panies@ M (or e-a"ple) in so"e industries) there "ay be an ac:no+led!ed "ar:et leader +hich in(or"ally sets prices to +hich other producers respond) :no+n as price leadership% In other situations) co"petition bet+een sellers in an oli!opoly can be (ierce) +ith relati ely lo+ prices and hi!h production% &his could lead to an e((icient outco"e approachin! per(ect co"petition% &he co"petition in an oli!opoly can be !reater than +hen there are "ore (ir"s in an industry i() (or e-a"ple) the (ir"s +ere only re!ionally based and didn8t co"pete directly +ith each other% &he +el(are analysis o( oli!opolies su((ers) thus) (ro" sensiti ity to the e-act speci(ications used to de(ine the "ar:et8s structure% In particular) the le el o( dead+ei!ht loss is hard to "easure% &he study o( product di((erentiation indicates oli!opolies "i!ht also create e-cessi e le els o( di((erentiation in order to sti(le co"petition% In an oli!opoly) (ir"s operate under i"per(ect co"petition and a :in:ed de"and cur e +hich re(lects inelasticity belo+ "ar:et price and elasticity abo e "ar:et price) the product or ser ice (ir"s o((er) are di((erentiated and barriers to entry are stron!% 0ollo+in! (ro" the (ierce price co"petiti eness created by this stic:y3up+ard de"and cur e) (ir"s utiliEe non3 price co"petition in order to accrue !reater re enue and "ar:et share%
1J
. Oligo"olisti om"etition:
An oli!opoly is a "ar:et (or" in +hich a "ar:et or industry is do"inated by a s"all nu"ber o( sellers ?oli!opolists@% &he +ord is deri ed (ro" the .ree: (or (e+ sellers% $ecause there are (e+ participants in this type o( "ar:et) each oli!opolist is a+are o( the actions o( the others% &he decisions o( one (ir" in(luence) and are in(luenced by the decisions o( other (ir"s% Strate!ic plannin! by oli!opolists al+ays in ol es ta:in! into account the li:ely responses o( the other "ar:et participants% &his causes oli!opolistic "ar:ets and industries to be at the hi!hest ris: (or collusion% 6li!opoly is a co""on "ar:et (or"% As a #uantitati e description o( oli!opoly) the (our3(ir" concentration ratio is o(ten utiliEed% &his "easure e-presses the "ar:et share o( the (our lar!est (ir"s in an industry as a percenta!e% Usin! this "easure) an oli!opoly is de(ined as a "ar:et in +hich the (our3(ir" concentration ratio is abo e 40L% 6li!opolistic co"petition can !i e rise to a +ide ran!e o( di((erent outco"es% In so"e situations) the (ir"s "ay collude to raise prices and restrict production in the sa"e +ay as a "onopoly% .Unli:e in per(ect co"petition) the "onopolistically co"petiti e (ir" does not produce at the lo+est attainable a era!e total cost% Instead) the (ir" produces at an ine((icient output le el) reapin! "ore in additional re enue than it incurs in additional cost ersus the e((icient output le el% 2.

Abo e the :in:) de"and is relati ely elastic because all other (ir"8s prices re"ain unchan!ed% $elo+ the :in:) de"and is relati ely inelastic because all other (ir"s +ill introduce a si"ilar price cut) e entually leadin! to a price +ar% &here(ore) the best option (or the oli!opolist is to produce at point E +hich is the e#uilibriu" point and) incidentally) the :in: point% Nin:edI de"and cur es are si"ilar to traditional de"and cur es) as they are do+n+ard3 slopin!% &hey are distin!uished by a hypothesiEed con e.bend +ith a discontinuity at the bend M the H:in:%I &here(ore) the (irst deri ati e at that point is unde(ined and leads to a 'u"p discontinuity in the "ar!inal re enue cur e% Ou! fo us: S:%A6.9anglades1 SQUARE $an!ladesh (irst entured into the te-tile sector +ith the establish"ent o( the (irst unit o( the &e-tile 2td% in 1JJB% A year later the establish"ent o( the second unit (ollo+ed% In $an!ladesh there are so"e other co"panies +or:in! in this sector% 0ollo+in! na"es are the "ost pro"inent:
• • •
$ase &e-tile 2i"ited $e-i"co &e-tiles N7S Apparels) 4hitta!on!
In "ost cases SQUARE &e-tile 2td% and $e-i"co &e-tiles are do"inatin! the "ar:et and they respond to price chan!es o( each other se erely% In that sense) it can be said that SQUARE is operatin! in a oli!opolistic "ar:et structure% 4.ree: "ono ?PQRS@) alone or sin!le T polQ ?UVWX@) to sellY is a persistent situation +here there is only one pro ider o( a product or ser ice in a particular "ar:et% <onopolies are characteriEed by a lac: o( econo"ic co"petition (or the !ood or ser ice that they pro ide and a lac: o( iable substitute !oods% O1Y A "onopoly should be distin!uished (ro" "onopsony) in +hich there is only one buyer o( a product or ser iceG a "onopoly "ay also ha e "onopsony control o( a sector o( a "ar:et% 2i:e+ise) a "onopoly should be distin!uished (ro" a cartel ?a (or" o( oli!opoly@) in +hich se eral pro iders act to!ether to coordinate ser ices) prices or sale o( !oods% A !o ern"ent3!ranted "onopoly or le!al "onopoly is sanctioned by the state) o(ten to pro ide an incenti e to in est in a ris:y enture% &he !o ern"ent "ay also reser e the enture (or itsel() thus (or"in! a !o ern"ent "onopoly% . Mono"oly: A "onopoly O(ro" .onomi analysis: 1% Fo close substitutes: A "onopoly is not "erely the state o( ha in! control o er a productG it also "eans that there is no real alternati e to the "onopoliEed product% 20
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2% A price "a:er: $ecause a sin!le (ir" controls the total supply in a pure "onopoly) it is able to e-ert a si!ni(icant de!ree o( control o er the price by chan!in! the #uantity supplied% 6ther co""on assu"ptions in "odelin! "onopolies include the presence o( "ultiple buyers ?i( a (ir" is the only buyer) it also has a "onopsony@) an identical price (or all buyers) and asy""etric in(or"ation &he result o( these conditions is that a co"pany +ith a "onopoly does not under!o price pressure (ro" co"petitors) althou!h it "ay (ace pricin! pressure (ro" potential co"petition% I( a co"pany raises prices too hi!h) then others "ay enter the "ar:et i( they are able to pro ide the sa"e !ood) or a substitute) at a lo+er price% O2Y &he idea that "onopolies in "ar:ets +ith easy entry need not be re!ulated a!ainst is :no+n as the Hre olution in "onopoly theoryI% /!i e setting fo! un!egulated mono"olies: In econo"ics) a (ir" is said to ha e "onopoly po+er Z or at least a de!ree o( "ar:et po+er Mi( it is not (acin! a horiEontal de"and cur e ?see supply and de"and@% &his is in contrast to a price3ta:in! (ir" +hich al+ays (aces a horiEontal de"and cur e) and there(ore sells little or nothin! at prices abo e e#uilibriu"% In contrast) a business +ith "onopoly po+er can choose the price at +hich it +ants to sell%
In "ost "ar:ets) (allin! de"and associated +ith increased price is due partly to losin! custo"ers to other sellers and partly to custo"ers +ho are no lon!er +illin! or able to buy the product% In a pure "onopoly "ar:et) only the latter e((ect is at +or:% &here(ore) the drop in sales as prices rise "ay be "uch less dra"atic than one "i!ht e-pect) especially (or necessary co""odities such as "edical care% 1o+e er) unless the "onopoly is a coerci e "onopoly) there is also the ris: o( co"petition arisin! i( the (ir" sets its prices too hi!h% I( a "onopoly can set only one price) it +ill produce a #uantity +here "ar!inal cost ?<4@ e#uals "ar!inal re enue ?<R@) as seen on the dia!ra" at ri!ht% &he "onopolist +ill then set the hi!hest price at +hich that #uantity can be sold% &his) the opti"al price accordin! to 21
.

ASA is one o( the "onopoly businesses re!ulated by the .supply and de"and theory) is abo e the co"petiti e price ?5c@ and belo+ the co"petiti e #uantity ?Qc@% Ou! fo us: S:%A6.o ern"ent and no pri ate business institution is allo+ed to establish any business concernin! these sectors% .o ern"ent% 6ur "ain (ocus SQUARE $an!ladesh does not operate any :ind o( "onopoly business%
•
$onsume! "e! e"tion of "!i e and &alue:
&he ulti"ate end users o( the product basically deter"ine +hether the price o( the product is ri!ht or +ron!% &he "ar:eters "ust understand the need and +ant o( the consu"ers% 4onsu"ers (ore!o the alue ?price@ in e-chan!e o( the product% I( their percei ed alue o( the product is lo+er than the price they ha e (ore!one) then the product +ill (ace a critical phase o( (ailin!% A!ain i( the percei ed alue is hi!her than the price) then the "ar:eters +ill lose substantial a"ount o( pro(it% E((ecti e buyer3oriented pricin! in ol es understandin! ho+ "uch alue consu"ers place on the bene(its o( the product and settin! a price that (its this alue%
•
Analy*ing t1e "!i e demand !elations1i":
In econo"ics) the de"and cur e can be de(ined as the !raph depictin! the relationship bet+een the price o( a certain co""odity) and the a"ount o( it that consu"ers are +illin! and able to purchase at that !i en price% 7e"and cur es are used to esti"ate beha iors in co"petiti e "ar:ets) and are o(ten co"bined +ith supply cur es) o(ten to esti"ate the e#uilibriu" price ?the price at +hich all sellers are able to (ind a +illin! buyer) also :no+n as "ar:et clearin! price@ and the e#uilibriu" #uantity ?the a"ount o( that !ood or ser ice that +ill be produced and bou!ht +ithout surplus/e-cess supply or shorta!e/e-cess de"and@ o( that "ar:et% 5lease see the article on Supply and 7e"and (or "ore details on ho+ this is done%
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.9anglades1 In $an!ladesh "onopoly businesses can only be seen in the Social Ser ices sectors% &hese businesses are "ainly operated by the .

i((en !ood@% &his ne!ati e slope is o(ten re(erred to as the Hla+ o( de"and)I +hich "eans that +hen all thin!s but price are held e#ual) i( the price o( the !ood/ser ice increasesG the less o( that !ood/ser ice +ill be purchased by consu"ers%
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/!i e elasti ity of demand:
6ne typical application o( the concept o( elasticity is to consider +hat happens to consu"er de"and (or a !ood ?(or e-a"ple) apples@ +hen prices increase% As the price o( a !ood rises) consu"ers +ill usually de"and a lo+er #uantity o( that !ood) perhaps by consu"in! less) substitutin! other !oods) and so on% &he !reater the e-tent to +hich de"and (alls as price rises) the !reater the price elasticity o( de"and% 4on ersely) as the price o( a !ood (alls) consu"ers +ill usually de"and a !reater #uantity o( that !ood) by consu"in! "ore) droppin! substitutes) and so (orth% 1o+e er) there "ay be so"e !oods that consu"ers re#uire) cannot consu"e less o() and cannot (ind substitutes (or e en i( prices rise ?(or e-a"ple) certain prescription dru!s@% Another e-a"ple is oil and its deri ati es such as !asoline% 0or such !oods) the price elasticity o( de"and "i!ht be considered inelastic%
0urther) elasticity +ill nor"ally be di((erent in the short ter" and the lon! ter"% 0or e-a"ple) (or "any !oods the supply can be increased o er ti"e by locatin! alternati e sources) in estin! in an e-pansion o( production capacity) or de elopin! co"petiti e products +hich can substitute% 6ne "i!ht there(ore e-pect that the price elasticity o( supply +ill be !reater in the lon! ter" than the short ter" (or such a !ood) that is) that supply can ad'ust to price chan!es to a !reater de!ree o er a lon!er ti"e% &his applies to the de"and side as +ell% 0or e-a"ple) i( the price o( petrol rises) consu"ers +ill (ind +ays to conser e their use o( the resource% 1o+e er) so"e o( these +ays) li:e 23
.a-is ?o(ten na"ed in e#uations as HQI@ and the price at +hich the !ood or ser ice +ould be purchased on the y a-is ?o(ten na"ed in e#uations as H5I@% 6ther deter"inants o( de"and such as inco"e) taste and pre(erence) prices o( related or substitute !oods/ser ices ?those consu"ed in place o( said !ood or ser ice@) etc% are supposedly held constant% A chan!e in one o( these constants +ill cause a shi(t in the de"and cur e) and the e-pected beha ior o( that "ar:et% <o e"ent alon! the de"and cur e sho+s the chan!es in the #uantity de"anded co"pared to chan!es in the price o( the !ood/ser ice% &he de"and cur e usually slopes do+n+ards (ro" le(t to ri!htG that is) it has a ne!ati e association ?(or t+o theoretic e-ceptions) see Keblen !ood and .7e"and schedules are tables that contain e-peri"entally obtained in(or"ation o( buyin! habits at aried prices% 0ro" these data a de"and cur e is then esti"ated and !raphed) usually +ith the a"ount o( a !ood or ser ice de"anded !raphed to the .

e (ocus on the product na"ed 5in: <eril $eauty Soap% At present each 100 !" pac: cost 1C ta:a in retail stores% 0e+ "onths bac: Unile er $an!ladesh) the co"petitor o( the SQUARE &oiletries 2td%) chan!ed the price o( their si"ilar product (ro" ta:a 1C to ta:a 13% In response SQUARE chan!ed their product price to ta:a 13 and at the sa"e ti"e they launched a ne+ pro"otional ca"pai!n +hich re#uested the consu"ers to return three used pac: o( the product to !et a sin!le product (or (ree% As the price o( the ra+ "aterial increased Unile er chan!ed their price o( the product to 1C a!ain% In the sa"e +ay SQUARE responded to the price chan!e and put bac: their product 24
.9anglades1 &he toiletries section o( the co"pany operates in the "onopolistically co"petiti e situation% 6ne o( the products o( the SQUARE &oiletries 2td% is <eril $eauty Soap% It has di((erent ersions o( the product% .(indin! a "ore (uel3e((icient car) ta:e ti"e% So consu"ers as +ell "ay be less able to adapt to price shoc:s in the short ter" than in the lon! ter"
$om"etito!s osts5 "!i e and offe!s: 6ne o( the "ost i"portant (actors a((ectin! the "ar:eters pricin! decision is the co"petitor8s cost and prices% It is also ulnerable to the co"petitor8s possible reaction to the decisions o( its o+n product pricin!% 1o+ "uch the pricin! decision o( the co"petitor is !on! to a((ect the co"pany depends on the "ar:et situation% In the oli!opolistic "ar:et structure) price o( the co"petitors has se ere e((ect on the co"pany8s pricin! decision% 6n the other hand) in pure co"petition) it has no e((ect on the co"pany) because the price o( the product is sa"e o( e eryone% <onopolistically co"petiti e co"panies depend on the pricin! o( the co"petitors but it has "uch less a((ect on the pricin! decision% In case o( "onopoly) the co"pany has little co"petition and it can ta:e drastic "easures in pricin! decisions to +ard o(( co"petitors% Ou! fo us: S:%A6.

So ial on e!ns: Social !roups can also "a:e i""ense i"pact in the pricin! policy% A!ain any psycholo!ical chan!e in the society +ill ha e i"pact on production and price% SQUARE has to consider this (actor as +ell% 0or e-a"ple) they can not increase the price o( "edicine too "uch because it +ill create ne!ati e i"pact on the society% /!i ing /oli y and St!ategy <ana!ers should start settin! prices durin! the de elop"ent sta!e as part o( strate!ic pricin! to a oid launchin! products or ser ices that cannot sustain pro(itable prices in the "ar:et% &his approach to pricin! enables co"panies to either (it costs to prices or scrap products or ser ices that cannot be !enerated cost3e((ecti ely% &hrou!h syste"atic pricin! policies and strate!ies) co"panies can reap !reater pro(its and increase or de(end their "ar:et shares% .o ern"ent is still in po+er% 4.ithin last (i e years SQUARE has increased their production by 1B%J3 percent as +ell as decreased the price o( their product in (orei!n "ar:ets because o( (a orable !o ern"ent policies% 4ondition o( the . >o&e!nment: 5olicies o( the !o ern"ent also a((ect the pricin! decisions% 0or e-a"ple) +hen . 6eselle!s: Any chan!e in the pricin! o( the products "ay a((ect the reactions o( the resellers% Specially) the products +hich ha e relati ely s"aller "anu(acturer to ulti"ate consu"er "ar:etin! channel) resellers o( these products respond #uic:ly to these price chan!es% 3.o ern"ent decreased e-port duties on <edicine) SQUARE had increased their production o( "edicine% .o ern"ent is also an i"portant aspect o( the co"pany% In est"ent in te-tile sector has decreased in the last year because in estors are a(raid to "a:e any contribution +hile the 4areta:er . .onomi $onditions: 5ricin! decision o( the co"pany is also a((ected by the econo"ic condition in +hich the co"pany is sub'ected to% In $an!ladesh) there is hi!her rater o( interest and in(lation pre ailin! and these chan!e #uite o(ten% So) SQUARE has to consider these (actors +hile settin! prices and it has to chan!e their product price accordin!ly% 2.enerally) pricin! policy re(ers ho+ a co"pany sets the prices o( its products and ser ices based on costs) alue) de"and) and co"petition% 5ricin! strate!y) on the other hand) re(ers to ho+ a co"pany uses pricin! to achie e its strate!ic !oals) such as o((erin! lo+er prices to increase sales olu"e or hi!her prices to decrease bac:lo!%
2C
.price to ta:a 1C and as the subse#uent ca"pai!n o( the price decline +as not pro(itable) it +as stopped% Ot1e! e7te!nal fa to!s 1.

4ost3based pricin! in ol es the deter"ination o( all (i-ed and ariable costs associated +ith a product or ser ice% A(ter the total costs attributable to the product or ser ice ha e been deter"ined) "ana!ers add a desired pro(it "ar!in to each unit such as a C or 10 percent "ar:up% &he !oal o( the cost3oriented approach is to co er all costs incurred in producin! or deli erin! products or ser ices and to achie e a tar!eted le el o( pro(it% $y itsel() this "ethod is si"ple and strai!ht(or+ard) re#uirin! only that "ana!ers study (inancial and accountin! records to deter"ine prices% &his pricin! approach does not in ol e e-a"inin! the "ar:et or considerin! the co"petition and other (actors that "i!ht ha e an i"pact on pricin!% 4ost3oriented pricin! also is popular because it is an a!e3old practice that uses internal in(or"ation that "ana!ers can obtain easily% In addition) a co"pany can de(end its prices based on costs) and de"onstrate that its prices co er costs plus a "ar:up (or pro(it% 2/
.9anglades1 In SQUARE Bangladesh settin! prices is one o( the principal tas:s o( "ar:etin! and (inance "ana!ers in that the price o( a product or ser ice o(ten plays a si!ni(icant role in that product8s or ser ice8s success) not to "ention in a co"pany8s pro(itability% A(ter establishin! the bases (or their prices) "ana!ers be!in de elopin! pricin! strate!ies by deter"inin! co"pany pricin! !oals) such as increasin! short3ter" and lon!3ter" pro(its) stabiliEin! prices) increasin! cash (lo+) and +ardin! o(( co"petition% <ana!ers also "ust ta:e into account current "ar:et conditions +hen de elopin! pricin! strate!ies to ensure that the prices they choose (it "ar:et conditions% In addition) e((ecti e pricin! strate!y in ol es considerin! custo"ers) costs) co"petition) and di((erent "ar:et se!"ents% 5ricin! strate!y entails in SQUARE Bangladesh "ore than reactin! to "ar:et conditions) such as reducin! pricin! because co"petitors ha e reduced their prices% Instead) it enco"passes "ore thorou!h plannin! and consideration o( custo"ers) co"petitors) and co"pany !oals% 0urther"ore) pricin! strate!ies tend to ary dependin! on +hether a co"pany is a ne+ entrant into a "ar:et or an established (ir"% Fe+ entrants so"eti"es o((er products at lo+ cost to attract "ar:et share) +hile incu"bents8 reactions ary% Incu"bents that (ear the ne+ entrant +ill challen!e the incu"bents8 custo"er base "ay "atch prices or !o e en lo+er than the ne+ entrant to protect its "ar:et share% I( incu"bents do not ie+ the ne+ entrant as a serious threat) incu"bents "ay si"ply resort to increased ad ertisin! ai"ed at enhancin! custo"er loyalty) but ha e no chan!e in price in e((orts to :eep the ne+ entrant (ro" stealin! a+ay custo"ers% &he (ollo+in! sections e-plain ho+ SQUARE Bangladesh de elops pricin! policy and strate!y% 0irst) cost3based pricin! is considered% &his is (ollo+ed by the second topic o( alue3based pricin!% &hird) de"and3based pricin! is addressed (ollo+ed by co"petition3 based pricin!% A(ter this) se eral strate!ies (or ne+ and established pricin! strate!ies are e-plained% 1.9anglades1 &he traditional pricin! policy can be su""ariEed by the (or"ula: Cost + Fixed profit percentage = Selling price. $ost=9ased /!i ing (n S:%A6.Ou! fo us: S:%A6.

9!ea#=-&en Analysis and 0a!get /!i ing &he brea:3e en point is the sales le el at +hich re enue e#uals total costs% &his "eans that at the brea:3e en le el o( sales) there is neither a pro(it nor a loss% Understandin! ho+ pro(it aries re#uires an analysis o( costs to identi(y those that chan!e +ith a chan!in! olu"e o( sales and those that do not% .9anglades1 &o illustrate "ar:up pricin! +e consider the (ollo+in! cost and e-pected sales o( soap produced by SQUARE Toiletries Ltd.hile "ana!ers "ust consider costs +hen de elopin! a pricin! policy and strate!y) costs alone should not deter"ine prices% <any "ana!ers o( industrial !oods and ser ice co"panies sell their products and ser ices at incre"ental cost) and "a:e their substantial pro(its (ro" their best custo"ers and (ro" short3notice deli eries% .hen considerin! costs) "ana!ers should as: +hat costs they can a((ord to pay) ta:in! into account the prices the "ar:et allo+s) and still allo+ (or a pro(it on the sale% In addition) "ana!ers "ust consider production costs in order to deter"ine +hat !oods to produce and in +hat a"ounts% Fe ertheless) pricin! !enerally in ol es deter"inin! +hat prices custo"ers can a((ord be(ore deter"inin! +hat a"ount o( products to produce% $y bearin! in "ind the prices they can char!e and the costs they can a((ord to pay) "ana!ers can deter"ine +hether their costs enable the" to co"pete in the lo+3cost "ar:et) +here custo"ers are concerned pri"arily +ith price) or +hether they "ust co"pete in the pre"iu"3price "ar:et) in +hich custo"ers are pri"arily concerned +ith #uality and (eatures% 2.1o+e er) critics contend that the cost3oriented strate!y (ails to pro ide a co"pany +ith an e((ecti e pricin! policy% 6ne proble" +ith the cost3plus strate!y is that deter"inin! a unit8s cost be(ore its price is di((icult in "any industries because unit costs "ay ary dependin! on olu"e% As a result) "any business analysts ha e criticiEed this "ethod) ar!uin! that it is no lon!er appropriate (or "odern "ar:et conditions% Ou! fo us: S:%A6.:
.ith :no+led!e o( the le el o( sales at +hich brea:3e en is achie ed and :no+led!e o( the rate o( chan!e o( pro(it) it is possible to esti"ate the pro(it (or 2B
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$on lusion
SQUARE $an!ladesh is one o( the leadin! business or!aniEations% &here is no doubt e((ecti e use o( pricin! consideration and approaches play a ital role in their success% &he !ro+th o( the co"pany is re"ar:able ?19%3L@ in 200B considerin! the "ar:et situation and the threshold is the i"ple"entation o( ne+ "ar:etin! strate!ies as +ell as other re(or"s% In our report +e ha e co ered al"ost all o( the business se!"ents o( SQUARE% .e ha e (ound that all o( those business se!"ents sets price accordin! to "ar:et de"and) co"petition) cost and custo"ers8 percei ed alue% So +e can easily conclude that their pricin! considerations and approaches are success(ul% $ut in so"e sectors pricin! should be a bit "ore realistic) such as their internet ser ice pro idin! sector% &hey should also ha e "ore interest in launchin! ne+ products% $ecause ne+ product pricin! is "uch "ore challen!in!% And +e thin: SQUARE should be "ore attenti e to the pricin! considerations and approaches o( ne+ products% A!ain they should ary their products and prices accordin! to the tar!et !roups as they "ostly char!e sa"e price (or all%
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